It’s like early 2007 all over again. Or at least it was according the Daily Telegraph on Monday. Which is not to say the story isn’t true.
So take a deep intake of breath…
The newspaper reveals that private equity group Blackstone is putting together a consortium – believed to include China’s newly established sovereign wealth fund – to launch a counterbid for Rio Tinto prior to breaking the mining group up. The move rivals an unsolicited all-share offer for Rio from BHP Billiton.
Says the Telegraph:
Blackstone is already believed to have appointed lawyers for the approach, and is in talks with bankers and public relations companies.
As well as un-picking Rio’s takeover of aluminium producer Alcan, Blackstone would sell off Rio’s flagship asset – its iron ore business. Heroically:
Blackstone believes the key iron ore operations are worth at least $110bn, based on the £518m valuation placed on Australian miner Midwest Resources by Chinese company Sinosteel.
Yes, the Blackstone team has reportedly taken the numbers attached to a tiddler Aussie deal involving a Chinese buyer and extrapolated these to $110bn disposal opportunity. And:
The $110bn figure – which compares with Rio’s market capitalisation of $150bn – is based on Rio’s existing proven reserves. However it is believed further mineralisation in the Pilbara in Australia and at the Simandou project in Guinea could push this valuation and that of Rio as a whole even higher.
Adding weight to the Chinese angle is the fact that China Investment Corp, the country’s $200bn SWF paid $3bn for a 10 per cent holding in Blackstone earlier this year.
Shares in Rio were forecast to open 1 per cent higher at around £58 in early trade.